MARKET BARRIERS TO WIDESPREAD DIFFUSION OF CLIMATE-APPROPRIATE HVAC RETROFIT TECHNOLOGIES

Transcription

1 Emerging Technologies MARKET BARRIERS TO WIDESPREAD DIFFUSION OF CLIMATE-APPROPRIATE HVAC RETROFIT TECHNOLOGIES Prepared by: Emerging Products Customer Service Southern California Edison February 2015

2 Acknowledgments Southern California Edison s Emerging Products (EP) group is responsible for this project. It was developed as part of Southern California Edison s Emerging Technologies Program under internal project number. Jay Madden managed this technology evaluation with overall guidance and management from Jerine Ahmed. Contact Jay.Madden@sce.com for more information on this project. Disclaimer This report was prepared by Southern California Edison (SCE) and funded by California utility customers under the auspices of the California Public Utilities Commission. Reproduction or distribution of the whole or any part of the contents of this document without the express written permission of SCE is prohibited. This work was performed with reasonable care and in accordance with professional standards. However, neither SCE nor any entity performing the work pursuant to SCE s authority make any warranty or representation, expressed or implied, with regard to this report, the merchantability or fitness for a particular purpose of the results of the work, or any analyses, or conclusions contained in this report. The results reflected in the work are generally representative of operating conditions; however, the results in any other situation may vary depending upon particular operating conditions. Southern California Edison Page ii

3 EXECUTIVE SUMMARY This study seeks to identify market barriers and other factors impeding adoption and promotion of downstream climate-appropriate HVAC retrofit technologies, as well as develop opportunities to increase adoption and promotion by addressing market barriers. This study focuses on two climate-appropriate technologies in particular: An evaporative pre-cooling condenser air retrofit unit; and A retrofit supply fan speed control. These two technologies, and their diffusion in the small and medium-sized commercial buildings market within Southern California Edison s service area, serve as case studies for other climate-appropriate retrofit HVAC technologies. To understand the market for climate-appropriate HVAC retrofit technologies, the project team conducted preliminary research to map the basic market structure and identify key market actors (also referred to herein as stakeholder groups). Next, the team developed a logic model to identify the relevant behavioral drivers applicable to each stakeholder group and outlined a broad study design and data collection strategy based on the model. They then collected data using interviews and surveys of stakeholders with and without experience with climate-appropriate HVAC. The data collected was first sorted into broad categories defined by problems and solutions related to the three elements of the behavioral model outlined: motivation, ability, and trigger. Subsequently, the data were pile sorted and analyzed to identify the salient themes that emerged within each of those broad topics, and further pile sorted according to subthemes and stakeholder groups. The team then made specific recommendations based on the analysis of the key issues and evidence of alternative solutions provided by study respondents, as appropriate. As this was exploratory work based on data from a small sample, no formal quantitative analysis was conducted. However, when deemed useful, an indication of the prevalence of certain responses was provided. The project team identified key factors that influence stakeholders motivation, ability, and triggers to adopt and promote climate-appropriate retrofit technologies. Eight factors that particularly influence stakeholders motivations to adopt and promote climate-appropriate HVAC retrofit technologies were identified: Technology requirements and performance: the human, material, and logistical resources required by the technology or policy for proper installation, commissioning, maintenance and performance Technology costs: the initial and ongoing financial costs, uncertainty surrounding such costs, and diffused responsibility for such costs Additional benefits: value besides energy savings provided by the retrofits Access to information: whether and how stakeholders can obtain pertinent information on retrofits Endorsements: the influence of recommendations by utilities, distributors and contractors, as well as the influence of social norms Status quo bias: the human tendency to prefer the current state of affairs Stakeholder coordination: the need for synchronized activities within and across stakeholder groups Southern California Edison Page iii

4 Accountability and support: the ability to hold responsible and gain assistance from appropriate parties in the event of a problem In addition, the project team identified six factors that particularly influence stakeholders ability to adopt and promote climate-appropriate HVAC retrofit technologies: Technical feasibility: the viability of a technology given the climate, building and rooftop air conditioning unit (RTU) characteristics, as well as the human resources required Cost: the financial cost of retrofits, the impact of potential utility incentives, and the uncertainties surrounding both cost elements Effort: the amount of work involved in selling retrofits, obtaining rebates, and installing and maintaining the equipment Awareness, knowledge and communication: stakeholders level of awareness and knowledge about retrofit opportunities, as well as the transmission of information among stakeholders Access: the logistical details surrounding the acquisition of retrofits from those in the supply chain Empowerment: whether or not stakeholders are endowed with the power to adopt and/or promote retrofits Numerous recommendations are provided for addressing the barriers identified. Southern California Edison Page iv

5 ABBREVIATIONS AND ACRONYMS AHRI ASHRAE CEC CLTEESP CPUC DOE ESCOs ET Summit HVAC IHACI IRB LEDs M&V NATE PNNL ROI RTU SCE UC Davis WCEC Air-Conditioning, Heating, and Refrigeration Institute American Society of Heating, Refrigerating and Air-Conditioning Engineers California Energy Commission California Long Term Energy Efficiency Strategic Plan California Public Utilities Commission U.S. Department of Energy Energy service companies Emerging Technology Summit Heating, Ventilating, and Air Conditioning Institute of Heating and Air Conditioning Industries Institutional Review Board Light emitting diodes Monitoring and verification North American Technician Excellence Pacific Northwest National Laboratory Return on investment Rooftop air conditioning unit Southern California Edison University of California, Davis Western Cooling Efficiency Center Southern California Edison Page v

6 CONTENTS EXECUTIVE SUMMARY... III INTRODUCTION... 1 BACKGROUND... 1 PROJECT OBJECTIVES AND SCOPE... 1 OVERVIEW OF SELECTED TECHNOLOGIES... 3 TECHNOLOGY A... 3 TECHNOLOGY B... 3 METHODOLOGY... 5 STUDY DESIGN... 5 RECRUITMENT AND DATA COLLECTION... 7 TIMELINE... 9 DECISION-MAKING FRAMEWORK STAKEHOLDERS BEHAVIORAL MODEL CONTEXTUAL OVERVIEW RESULTS AND DISCUSSION MOTIVATION ABILITY TRIGGERS TOP BARRIERS IDENTIFIED SYNTHESIS OF KEY FINDINGS DEPENDENCY RISK TRANSPARENCY ACCOUNTABILITY TRUST CONCLUSIONS RECOMMENDATIONS MOTIVATION TECHNOLOGY REQUIREMENTS AND PERFORMANCE TECHNOLOGY COSTS ABILITY EFFORT AWARENESS, KNOWLEDGE, AND COMMUNICATION EMPOWERMENT TRIGGERS REFERENCES Southern California Edison Page vi

7 FIGURES FIGURE 1. FLOW DIAGRAM OF STAKEHOLDER RELATIONSHIPS FIGURE 2. BEHAVIORAL FORMULA FIGURE 3. FOUR-LEVEL CONTEXT OF RETROFIT DECISION-MAKING FIGURE 4. DISTRIBUTION MODELS OF TECHNOLOGY A AND TECHNOLOGY B Southern California Edison Page vii

8 INTRODUCTION BACKGROUND Cooling for commercial facilities is predominantly provided by rooftop packaged air conditioning units (RTUs) and other unitary vapor-compression systems. Cooling from these systems alone accounts for roughly 25% of the annual electricity use 1 and more than 50% of the peak electrical demand in commercial buildings in California. 2 Given the longevity of RTUs, retrofitting them with energy efficient upgrades has been identified as a promising strategy to reduce energy consumption among existing equipment. Specifically, the California Long Term Energy Efficiency Strategic Plan (CLTEESP) developed by the California Public Utilities Commission (CPUC) states as Goal 6 that new climate-appropriate HVAC technologies (equipment and controls, including system diagnostics) are developed with accelerated marketplace penetration. 3 The push toward climate-appropriate technologies implies, by its very nature, the need for highly specialized technologies designed to deliver savings during peak demand periods, when air conditioning equipment must run at full tilt, given particular climatic characteristics. The hybrid equipment that participated in the University of California, Davis (UC Davis) Western Cooling Challenge 4 was shown to provide 40 65% savings in California climates during peak operating conditions. Thus, some technical solutions already exist. However, accelerated market penetration has not occurred. The market potential for downstream climate-appropriate heating, ventilating, and air conditioning (HVAC) retrofit technologies is high, as there are more than one million conventional RTUs in California. In time, these conventional HVAC systems could be replaced by climate-appropriate systems. To this end, several initiatives are needed: programs, such as this research study, to understand the market barriers hindering adoption, as well as promotion on the part of manufacturers, distributors, design engineers, contractors, and consumers. PROJECT OBJECTIVES AND SCOPE The primary objectives of this study are to: Identify market barriers and other factors impeding downstream adoption and promotion of climate-appropriate HVAC retrofit technologies Identify opportunities to address, reduce, eliminate, or circumvent market barriers in order to increase adoption 1 California Energy Commission, Energy Information Administration CPUC 2011, p The Western Cooling Challenge is a multiple winner competition that encourages HVAC manufacturers to develop climateappropriate rooftop packaged air conditioning equipment that will reduce electrical demand and energy use in Western climates by at least 40% compared to current federal standards. See Southern California Edison Page 1

9 Although prepared in response to CLTEESP, the scope of the report is focused more narrowly than defined in the Strategic Plan itself. Herein, market is defined as the manufacturers, buyers, and sellers of selected climate-appropriate HVAC retrofit technologies for small- to medium-sized commercial buildings, and other related market players and stakeholders. The stakeholders referred to throughout the report include manufacturers, distributors, and manufacturers sales representatives; design and consulting engineers; contractors and technicians; consumers (e.g., building owners, facilities managers), utilities; policymakers; and technical experts. The stakeholder groups and the relationships among them are described in a subsequent section on the Decision-Making Framework. Decision-Making Framework For illustrative purposes, this report focuses in particular on two HVAC retrofit technologies, which are described in greater detail in the next section: Technology A: an evaporative pre-cooling condenser air retrofit unit Technology B: a retrofit supply fan speed control In contrast to the Energy Efficiency Strategic Plan, which covers all of California, this report focuses primarily on the service territory of Southern California Edison (SCE). However, although the details of emerging technology programs and markets differ across utility territories, valuable lessons can be drawn from the experience of stakeholders outside of SCE s service territory. For that reason, some of the data collected reflects market barriers or solutions identified by respondents with experience outside of Southern California. Southern California Edison Page 2

10 OVERVIEW OF SELECTED TECHNOLOGIES This section describes the two HVAC retrofit technologies examined in this study. TECHNOLOGY A Technology A is a dual-evaporative pre-cooler. This climate-appropriate add-on for conventional rooftops units uses direct evaporative cooling to reduce air temperature at the condenser inlet, then circulates the cooled water from this process through a heat exchanger at the outdoor air inlet to cool ventilation air. As one respondent said, The technology is innovative compared to the status quo and has a very good foundation in the thermodynamics of it and how it works. The technology can be installed with any new RTU or added to existing equipment as a retrofit, with only modest integration efforts, including connecting the unit to a water supply which may or may not already exist on the rooftop. The system features a simple stand-alone control scheme that does not require revision or integration with existing unit controls. Because it incorporates relatively few materials and standard, readily available components, it has generally lower equipment costs compared to other climate-appropriate hybrid cooling strategies. A laboratory evaluation of Technology A indicates that it can reduce energy use by more than 40% during peak demand periods in Southern California climates. 5 Technology A is particularly effective for buildings with high peak demand from cooling and large annual cooling loads located in hot, dry climates. After a Technology A unit is sold, through one of two channels described in a later section, the one of two approved contractors installs the equipment according to technical specifications outlined by the manufacturer. In its direct sales, the manufacturer of Technology A has focused on a partnership with a single big box retailer. Their plan is to develop the strategy and marketing materials, perfect the model of developing the relationship, and then replicate the approach with other chain retailers. The decision to focus on chain retailers is a strategic one, as this quote highlights: It s really a combination of the marketing advantage and performance advantage. Chain retailers buildings basically operate on a schedule, they have high cooling loads and they have multiple units of the same type on the same building. That latter point relates to the opportunity to multiply our design by selling to one customer for many identical units. TECHNOLOGY B Technology B is also a retrofit technology, but it is not climate-appropriate, per se, as the description below will clarify. It is used in this report as a point of comparison for climate-appropriate retrofits, represented by Technology A. As a retrofit, Technology B shares many of the same challenges and market barriers as climateappropriate retrofits, such as high initial costs, unfamiliarity, dependency on RTU operation, and non-traditional distribution channels. Yet Technology B is an example of best practices that climate-appropriate retrofits should emulate. Thus, while Technology A highlights many of the market barriers climate-appropriate retrofits as 5 Woolley Southern California Edison Page 3

11 a group face, Technology B illustrates some ways of overcoming those market barriers through careful product design and deployment strategies. With that caveat, Technology B is a retrofit supply fan speed control. This technology enhances RTU performance by adding three main features: a variable speed supply fan control (using a variable frequency drive), advanced economizer controls (including web-connected fault detection), and demand controlled ventilation. As described by one respondent, Technology B provides three primary energy conservation measures bundled into one solution. Full application of the technology uses a platform that provides web-based visualization of RTU efficiency, system performance, fault detection, remote diagnostics, real-time efficiency and performance verification, and energy accountability tools. This platform enables monitoring of all of a customer s RTUs with Technology B installed together. Technicians, facilities managers, and building owners can visualize the system and be alerted to problems immediately. As one respondent said, the technology puts customers in touch with units, so they know when the dampers fail or when they ve lost refrigerant charge or the heating is not working. [Technology B] can tell them those things and they could take that to maintenance. Customers ideally [are those] who will appreciate that, who care about fault detection, and who want to know [how their system is operating]. This transparency creates accountability with respect to the RTU, but also to the retrofit unit as well. The latter means that the technology has the innate ability to verify and document its own performance. This has a distinct advantage in the realm of utility programs, as according to one respondent, it is how the manufacturer proves that the product is still out there working [and generating the] persistent savings that the utilities are looking for. An independent study conducted by the Pacific Northwest National Laboratory (PNNL) for the Department of Energy (DOE) estimated that Technology B reduces energy use by an average of 57%. 6 Technology B has the most potential for energy savings in commercial buildings with long run times, large motor horsepower, and a large (or oversized) cooling capacity. Technology B saves the most energy in two main ways: ensuring proper economizer operation, and reducing fan speed for continuous ventilation and part load operation. Technology B comes as a pre-wired kit that contains numerous sensors and all the supplies required for installation. The technology can be integrated with an existing building management system or installed as a standalone building management system. Technology B retrofits are sold to major accounts directly by the manufacturer, and to smaller local customers through affiliate partners, as described in more detail later. Most affiliate partners are turnkey affiliates, meaning they handle sales and installation. Those affiliates that do not have installation capabilities partner with manufacturer-trained and approved mechanical contractors to do the installation. Thus, the manufacturer ensures proper installation through thorough preparation of its product, as well as careful vetting and preparation of its installers. 6 Wang et al Southern California Edison Page 4

12 METHODOLOGY STUDY DESIGN This research study uses a range of qualitative data collection and analysis techniques to fulfill its objectives. Preliminary research enabled mapping of the basic market structure and identification of key market actors (also referred to herein as stakeholder groups). Next, a logic model was developed to identify the relevant behavioral drivers applicable to each stakeholder group (as described in the Logical Framework section below). Based upon the model, a broad study design and data collection strategy were outlined. During the study design phase of the project, it was determined that semi-structured interviews would be the primary data collection methodology. Such interviews typically include a predetermined set of broad and narrow questions and additional spontaneous prompts or follow-up questions to pursue a line of inquiry further, as appropriate. This interviewing approach has many advantages: it provides structure and flexibility, it encourages detailed (and sometime lengthy) responses in respondents own language (which provides insight into how people think and talk about the subject matter), and it can elicit many types of data. Semi-structured interviews balance depth and breadth, allowing researchers to systematically and efficiently collect and analyze rich, qualitative data from many respondents. This data collection technique is especially useful when conducting exploratory research, as is the case with this study, because it facilitates the discovery of previously unknown information and in-depth probing, where appropriate. Specific interview protocols were designed for each stakeholder group to ensure thorough, consistent, and efficient data collection. Pre-determined questions in the protocols covered a range of topics: Respondents experience with Technology A and/or Technology B. or other climate-appropriate HVAC technologies, if any Information received or transmitted about climate-appropriate HVAC technologies between stakeholder groups Market barriers respondents face in adopting or promoting climateappropriate HVAC technologies Market barriers other stakeholders face in adopting or promoting climateappropriate HVAC technologies The interviews followed the respondents lead and some questions were omitted or added as appropriate, according to the researchers discretion. With consent of the interview subjects, each of the interviews were audio recorded to ensure accuracy in the data collection, as was the roundtable discussion, described below. The semi-structured interviews were supplemented with several other data collection efforts. For example, numerous group discussions related to climate-appropriate retrofit technologies were observed and analyzed. The first was a roundtable discussion of various industry experts, convened by researchers from Western Cooling Efficiency Center (WCEC), 7 to begin to explore and identify the market actors and the barriers each faces. The roundtable discussion took place on December 5, 7 WCEC is a group that stimulates the development of impactful cooling technologies that can enable reduced electrical demand, energy and water consumption in buildings. See Southern California Edison Page 5

13 2013, and the 3 1/2-hour audio recording of it was subsequently transcribed and analyzed. Data was also collected from two tripartite discussions between the Emerging Technology group of a California utility, a climate-appropriate HVAC technology manufacturer, and a customer who had participated in a demonstration project to field test the manufacturer s technology. Technologies from two different manufacturers were assessed during the demonstration project, so the configuration of each tripartite meeting involved the utility and customer in both cases, but a different manufacturer in each. The discussions were conducted at the conclusion of the demonstration projects and facilitated by project team researchers. They focused on lessons learned from the field tests, market barriers to wider adoption, and opportunities to address them. Due to the nature of the meetings, audio recording was not possible, but detailed notes were taken during the discussions and field notes were expanded upon afterwards. Finally, data was collected from Market Barriers-related panel sessions at the Emerging Technology Summit, a biennial conference for multiple stakeholder groups to advance the adoption of emerging technologies for energy efficiency and demand response. Detailed notes were taken on the presentations and the subsequent discussions about market barriers and potential solutions as they pertained to climate-appropriate retrofits. To prepare the data collected from the interviews and group discussions, audio recordings (when available) were transcribed, in part or in full. The data collected was first sorted into broad categories of problems and solutions to the three elements of the behavioral model cited above: motivation, ability, and trigger. Subsequently, the data was pile sorted to identify the salient themes (e.g., technology performance, awareness, and knowledge) that emerged within each of those broad topics. Data on each of the themes was further pile sorted according to sub-themes and stakeholder groups. As this was exploratory work based on data with a small sample size, no formal quantitative analysis was conducted. However, when deemed useful, an indication of the prevalence of certain responses was provided. During the course of the study, it became clear that recruiting interview respondents who did not have experience with climate-appropriate technologies would prove difficult. Thus, an additional data collection effort was undertaken to collect data from those respondents. Specifically, separate online surveys were developed for contractors, technicians, and distributors that focused on the market barriers respondents and their customers face in adopting and promoting climate-appropriate HVAC technologies. Closed-ended questions were developed based upon the key findings collected from the interviews by that point, and open-ended questions allowed for the collection of additional issues not yet raised by interview respondents. Southern California Edison Page 6

14 Given the very small sample size of each of the surveys, only limited quantitative analysis of the data was conducted. However, the survey data does provide an indication of the ways in which the barriers faced by adopters (i.e., interview and discussion participants) and non-adopters (i.e., survey participants) are similar and different. RECRUITMENT AND DATA COLLECTION Project team researchers engaged in recruitment efforts for four different data collection approaches: the roundtable discussion, interviews, surveys, and participant observation of panel discussions. In total, data was collected from 76 specific individuals and countless more who contributed anonymously to the group discussions. All of the original stakeholder groups identified, as well as market facilitators and regulators, were represented among the study participants. HUMAN SUBJECTS PROTECTION UC Davis researchers engaged in research involving human subjects are required to have study plans and materials reviewed by the UC Davis Institutional Review Board (IRB). The job of the IRB is to ensure that human subjects and their sensitive information are adequately protected throughout the course of the study and thereafter. In compliance with this policy, the WCEC research team submitted an application for review in August 2014, which included a draft of all study materials (e.g., a study protocol, informed consent forms, and survey and interview protocols) to the IRB. The study was found to present minimal risk to research subjects and was deemed exempt. Upon completion of the review, the researchers was granted permission to proceed. In accordance with the data protection plan the researchers outlined in the IRB application, all data and supporting materials provided in the report have been anonymized. ROUNDTABLE DISCUSSION Roundtable discussion participants were recruited through the professional network of WCEC researchers and SCE staff. Representatives from several stakeholder groups deemed by the researchers to have valuable input on the subject of market barriers were invited by to participate. In all, 14 individuals agreed to participate, representing the following stakeholder groups: manufacturers representatives, distributors, contractors, consulting engineers, utility staff, and technology experts. Participants gathered in person at SCE offices in Rosemead, CA, for 3 1/2 hours on December 5, The discussion was mostly participant-led, but the researchers provided some broad questions to guide the conversation. Roundtable discussants were not compensated for their participation in the study. INTERVIEWS Interview subjects were recruited from all key stakeholder groups, including manufacturers, distributors, and manufacturers representatives, contractors and technicians, design engineers, utilities, industry experts, and market facilitators. Recruitment was conducted using a variety of methods, including purposive, convenience and snowball sampling techniques. An initial list of stakeholder representatives thought to be promising interview candidates was provided by SCE. Southern California Edison Page 7

15 Some of those individuals were contacted directly by WCEC researchers, whereas others were initially contacted by SCE to make an introduction. In general, recruitment through this approach yielded few respondents. Thus, subsequent efforts to recruit participants focused on personal referrals from the manufacturers interviewed and from individuals the researchers met through professional networking (e.g., at the Emerging Technology Summit). In total, in-depth interviews were conducted with 16 individuals from across the various stakeholder groups. Regardless of how the introduction was made, contacts were sent an describing the research study and asking for their participation. After an interview time was established, participants were sent a copy of the informed consent document to give them time to review it before the interview. The consent document provided more information about the study and their rights as research participants, as required by the UC Davis IRB. Interviews were conducted primarily over the phone, although several were conducted in person. Verbal consent was obtained and recorded at the beginning of each interview. The interviews were audio recorded, and each took about an hour. Interview participants were not compensated for their participation in the study. Overall, recruitment for the interviews proved much more difficult than originally anticipated, especially among individuals who did not have direct experience with climate-appropriate technologies. As a result, the number of interviews conducted is smaller than anticipated, and the interview cohort does not include end consumers, as originally planned. However, the depth of the interviews and other discussions observed provided ample data to meet the study objectives. SURVEYS Recruitment for the contractor/technician and distributor surveys was done in person at the Institute of Heating and Air Conditioning Industries (IHACI) trade show held on November 19, 2014, in Pasadena, CA. With substantial support from the IHACI organizers, WCEC researchers set up a booth with laptops and tablets available for respondents to take the online surveys. Potential respondents were recruited with flyers at the registration counter and in-person when passing by the booth. In addition, a researcher visited each of the HVAC distributors booths to request their participation. Survey participants were offered a $5 gift card upon completion of the survey, and a chance to win $200, provided by IHACI. Survey data was collected from 13 contractors or technicians and 3 commercial HVAC distributors. PANEL DISCUSSIONS No recruitment was conducted for the tripartite group discussions or panel discussions at ET Summit. In some cases, participants were aware of the researchers intent to collect data from the discussion for this research study and in other cases they were not. In both cases, however, the researchers took detailed notes about the market barriers and possible solutions, as they pertained to each stakeholder group. Data was collected from the 17 participants who attended the 2 tripartite meetings, as well as from the 16 panelists at the ET Summit and the numerous audience members who initiated relevant discussions after the panel. Southern California Edison Page 8

16 TIMELINE Preliminary data collection for this study began in November 2013 with the roundtable discussion. After a protracted delay due to staffing changes at the WCEC, work on the project resumed in June At that point, the study design was outlined and agreed upon with SCE and work continued according to the research plan. Recruitment for and implementation of the interviews took place from August 2014 until November The tripartite discussions took place in August Data was collected from the ET Summit in October Surveys were implemented at the IHACI trade show in November Data analysis and the writing of the draft final report was conducted between November 2014 and January The final report was completed in mid-february 2015, at which point the study was concluded. Southern California Edison Page 9

17 DECISION-MAKING FRAMEWORK Understanding stakeholders barriers to adopting and promoting HVAC retrofit products requires several steps. First, researchers must identify the stakeholders and next, understand how stakeholders make decisions about HVAC retrofit technologies. Specifically, this means determining the process by which such decisions are made, the context in which the process occurs, and the influence of various factors at each contextual level. Lastly, stakeholders must identify opportunities to address these market barriers. STAKEHOLDERS The stakeholders referred to in this section and throughout the document include the following groups: Manufacturers, who create the retrofit technologies Distributors and manufacturers representatives, who sell the retrofit technologies Design and consulting engineers, who specify the retrofit technologies in project designs Contractors and technicians, who install and maintain the retrofit technologies Consumers, who include the building owners who purchase the retrofits, and the facilities managers who retain responsibility for HVAC systems in general Utilities, which offer rebates for the retrofit technologies The relationships among these stakeholder groups is illustrated in Figure 1. FIGURE 1. FLOW DIAGRAM OF STAKEHOLDER RELATIONSHIPS Southern California Edison Page 10

18 BEHAVIORAL MODEL Work on this study was driven by an understanding of the basic logic underlying stakeholder decision-making. Building on the Fogg Behavioral Model 8, which outlines three key elements of behavior change (i.e., motivation, ability, and a trigger), the project team developed the model shown in Figure 2 to represent the factors that influence stakeholders to adopt or promote climate-appropriate technologies. FIGURE 2. BEHAVIORAL FORMULA These three elements can be described as follows: Motivation encompasses elements such as needs, wants, beliefs, and incentives. Individuals must have the motivation to take action. Ability relates to the time, cost, effort, knowledge and feasibility related to a particular course of action. With motivation and ability, a stakeholder may have the intention to adopt and/or promote climate-appropriate retrofit technologies, but may not move to action. Triggers are often required to overcome the inertia of the status quo. 9 Triggers can come in various forms (and topic-specific examples are provided in the next section), but they each serve to significantly raise the motivation or ability (or both) to take a certain action, such that the initial barriers are overcome and action is taken. In this context, the specific motivations, abilities, triggers, and resulting actions differ by stakeholder group, as shown by these examples: Motivation: Customers motivations to adopt climate-appropriate HVAC technologies may include saving money on their electric bill, whereas contractors motivations may include offering leading-edge technology that distinguishes them from the competition. Ability: Distributors may only be able to promote and adopt climateappropriate technologies if they are certain they can make a profit off them. However, contractors can do so only if they have the technical skills to install the technologies and access to a distributor that carries them. Action: The relevant action for design engineers and customers is retrofit adoption. For distributors and contractors, the relevant action is to both adopt the technology and promote it to the next stakeholder in the supply 8 See and Fogg 2009 for an overview. 9 See Fogg 2009; and for an overview. Southern California Edison Page 11

19 chain (i.e., the contractor, design engineer, or customer in the case of distributors, and customers in the case of contractors). In elucidating the relationship between contractors and distributors, the ability example illustrates that abilities of some stakeholders are sometimes dependent on the actions of others. This interconnection can make the problem of low market adoption difficult to address. However, such barriers are more easily overcome when each factor, and the interactions among them, are identified in a structured manner as the logic model presented here is intended to facilitate. CONTEXTUAL OVERVIEW Stakeholders decisions to adopt and promote climate-appropriate technologies occur within a broader context and are influenced by factors within that context. As Figure 3 illustrates, the context in which a decision occurs (or does not) is composed of multiple levels. A decision made by an individual, is driven by the individual s motivations and abilities, and takes place in the context of the individual s knowledge, beliefs, emotions, and actions. In the case of decisions related to HVAC retrofit technologies, the individual is embedded within an organization (e.g., firm, program, union) that has its own set of motivations and abilities to adopt or promote certain technologies. In turn, that organization is embedded within a supply chain comprising other organizations. Finally, all these levels of the market hierarchy exist within a particular environment. Environmental factors (e.g., legal, economic, structural, institutional, social, cultural) shape the opportunities and incentives individuals and the firms they comprise face at a given time. FIGURE 3. FOUR-LEVEL CONTEXT OF RETROFIT DECISION-MAKING Stakeholders decisions to adopt and promote climate-appropriate technologies are influenced by factors at the macro and micro levels, and interactions between the two. That is, individuals make such decisions in accordance with their motivations and abilities, within the confines of their broader context. Further discussion of that broader context is organized into three categories: the regulatory and economic environment, geographic environment, and the market conditions that relate to Southern California Edison Page 12

20 HVAC retrofit technologies. The specific elements of each category were identified by study participants and by the researchers independently of the data collection. REGULATORY AND ECONOMIC ENVIRONMENT The economic and regulatory environment in which stakeholders make decisions about climate-appropriate technologies comprise numerous factors that impact stakeholders motivations and abilities and thus strongly influence the outcome of those decisions. First, the regulations, codes and standards that govern the HVAC industry in California play a major role in shaping the requirements, opportunities, and incentives stakeholders face. For example, it is in response to regulation that utility programs exist to promote energy savings through retrofit installations. Economic factors that influence stakeholders decision-making include general economic conditions (e.g., robustness of the economy, access to credit, interest rates) and energy prices. The former can limit stakeholders ability to adopt and promote retrofit technologies, even when the motivation is present. By contrast, energy prices (specifically, high energy prices that make stakeholders generally more responsive to energy efficiency opportunities) tend to be a powerful motivator to adopt energy efficiency measures. GEOGRAPHIC ENVIRONMENT The geographic location of a given stakeholder can play a role in driving decisions to adopt and promote climate-appropriate retrofits. In California, coastal regions require less mechanical cooling to maintain comfortable indoor temperatures throughout the summer. Thus, stakeholders in those areas have less motivation to embrace technologies that deliver cooling more efficiently. By contrast, inland areas of California have high summertime cooling needs, substantially increasing peak load demand. In theory, stakeholders in those areas should be relatively more motivated to adopt and promote technologies that can reduce energy use and peak demand. MARKET CONDITIONS Climate-appropriate retrofit technologies compete against the status quo (i.e., existing installed equipment), newly installed conventional equipment, and other emerging technologies. The relative prices of each have a large influence on stakeholder adoption and promotion. Furthermore, the technical performance and reputation of various products and market actors can affect stakeholders motivations to adopt and promote climate-appropriate technologies from among the alternatives. The supply chain through which specific climate-appropriate technologies are distributed is an important component of the market context in which stakeholders make decisions. Figure 4 maps at a high level some differences in the supply chains for Technology A and Technology B. In the case of Technology A, the manufacturer retains responsibility for direct sales of equipment. Installation and maintenance services are provided by two HVAC contractors who have been trained by the manufacturer directly. In a second path to market, the manufacturer of Technology A employs a resale arrangement that allows a major RTU manufacturer to sell Technology A retrofits through its existing distribution channels (as well as units integrated with their own RTUs). Technology A is one of numerous third-party products resold by the RTU manufacturer. Southern California Edison Page 13

21 The manufacturer of Technology B also employs a two-pronged distribution strategy. For major accounts, the manufacturer retains responsibility for marketing and sales. However, the primary channel is an indirect sales model wherein affiliate partners (i.e., approved installers or energy service companies) serve as retailers in their local markets. Many of the sales are currently initiated by customers contacting the affiliate partners, rather than the other way around, so it appears that the latter plays only a semi-active role in marketing the technology. Technology B does not employ a traditional distribution model whereby HVAC distributors carry their products; Technology A does so only to a limited extent. Instead, both primarily retain ultimate control over their distribution networks; the manufacturer of Technology A through direct sales, and the manufacturer of Technology B through a vertically integrated model in which their affiliated partners sell equipment on their behalf. This arrangement has significant implications regarding the access of stakeholders further down the chain (i.e., design engineers, contractors and customers) to the products, as will be discussed later. FIGURE 4. DISTRIBUTION MODELS OF TECHNOLOGY A AND TECHNOLOGY B A separate but related aspect of the market conditions addresses the commercial presence of a manufacturer in a given locale (either directly or indirectly through representatives). A significant commercial presence in an area makes adoption of their product more likely by increasing access. It also boosts stakeholders motivation to adopt by conveying a sense that adopters can and will be adequately served by the manufacturer, its representatives, and the contractors that work with their product. Furthermore, geographic proximity seems to affect adoption and promotion. In the early phases of technology deployment, transmission is largely interpersonal. Thus, proximity to a stakeholder who has adopted or promotes climate-appropriate retrofit technologies, and the general market diffusion thereof, can impact individual stakeholders motivation and ability to adopt or promote such technologies themselves. Several respondents noted marked differences between the Southern and Northern California markets. One claimed that the inherent problems [in] Southern California [come from] weak engineering. He went on to explain: Southern California Edison Page 14

22 If you look at Northern California, they tend to have the most energy efficient way of thinking and approaching buildings. Southern California tends [to prioritize] the cheapest ways of building a building and it all stems from the strength of the energy consulting engineering role. In Northern California, the consulting engineers dominate. They are the powerhouse decision-makers. What they say, what they specify - they will hold contractors to that. In Southern California it s the flipside, it s what the contractors put down [that gets installed]. The implicit assumption the respondent here makes, is that design engineers are more likely to specify energy efficient equipment than contractors, in general, and furthermore, that contractors in Southern California are more likely to overrule a design specification in favor of a cheaper, less efficient technology. Thus, as the quote illustrates, the prevailing culture in a given market can influence not just what is recommended, and by whom, but also whether the recommendation is implemented in the final project. These dynamics can create an environment that is conducive to or hostile to retrofit technologies, even when other impediments are addressed. The above has outlined the logic of stakeholders decision-making with respect to adopting and promoting climate-appropriate retrofit technologies, and the contextual factors that influence the decisions that occur at the individual level. In the next section, key findings on the market barriers that stakeholders face are presented, according to the logic and structure outlined in the framework above. Southern California Edison Page 15

23 RESULTS AND DISCUSSION The key findings are structured in accordance with the behavioral model outlined in the section above. Specifically, factors affecting stakeholders motivations, abilities and triggers to adopt and promote climate-appropriate HVAC retrofit technologies are discussed in turn. MOTIVATION First, it must be acknowledged that much of stakeholders motivation for adopting and promoting climate-appropriate HVAC technologies stems from the policies that encourage these technologies. From a policy standpoint, among the many routes to energy efficiency (e.g., RTU replacement, quality maintenance, equipment standards), retrofits are essential to meeting energy and environmental targets. One respondent described the situation this way: If you can t tackle [energy efficiency] with the retrofit side in the existing building stock, then you re not going to get anywhere significant. You could raise new construction standards all you want, [but] if 20 years from now, 80% of the buildings standing are buildings that are here today, we better be doing something about that 80% or it s just almost futile. For that reason, policymakers are intensely motivated to encourage the adoption and promotion of climate-appropriate energy efficient retrofit technologies. However, as is illustrated in this section, many other factors influence stakeholders motivations to adopt and promote climate-appropriate HVAC retrofit technologies. Eight factors are discussed in this section: Technology requirements and performance, including the human, material, and logistical resources necessitated by the technology or policy for proper installation, commissioning, maintenance, and performance Technology costs, including the initial and ongoing financial costs, uncertainty about costs, and diffused responsibility for such costs Additional benefits, meaning the value provided by retrofits besides energy savings Access to information, that is, whether and how stakeholders can obtain pertinent information on retrofits Endorsements, referring to the role that recommendations by utilities, distributors and contractors play, as well as the role of social norms Status quo bias, meaning the human tendency to prefer the current state of affairs Stakeholder coordination, referring to the necessity to synchronize activities within and across stakeholder groups Accountability and support, meaning the ability to hold responsible and gain assistance from appropriate parties in the event of a problem. Southern California Edison Page 16

24 TECHNOLOGY REQUIREMENTS AND PERFORMANCE This section covers the technology requirements (i.e., installation and commissioning, operations and maintenance) and performance as they pertain to stakeholders motivations to adopt and promote climate-appropriate HVAC retrofit technologies. INSTALLATION AND COMMISSIONING Proper installation of climate-appropriate retrofits is critical for energy and cost savings, protection of equipment, and customer satisfaction. Energy efficient retrofits are only as good as the installation. As one respondent put it: You can have the best equipment, you can have the best program, but it s the contractor that has to help realize the true savings by putting the system in correctly. In fact, as another pointed out, energy saving retrofits only save the customer money if installed and maintained properly. Otherwise they can cost more than not installing them at all. Codes and standards dictate the guidelines for proper installation of HVAC equipment and are meant to ensure that the efficiency achieved matches the potential efficiency. In theory, the desire to ensure proper performance should stimulate sufficient motivation to install and commission an RTU or retrofit to code. In practice, however, many jobs are not done to code for a variety of reasons, not least of which is the additional time and cost involved. Stakeholders in the industry disagree about whether the code (and its enforcement) will eventually provide ample motivation to do proper installation and commissioning. Some feel the code will continue to take us where we need to go. Others counter that as the code continues to be ratcheted up, the variance between acceptance and the code continue[s] to widen. The condition of existing RTU equipment can also influence customers motivation to install a retrofit. If the RTU is new, customers may balk at the idea of spending more to increase efficiency further. On the other hand, if the equipment is relatively old, customers (and contractors) may not want to upgrade it with a retrofit. As one contractor said when asked to explain why he was not interested in installing Technology B in general: Older technology has its limitations. Old and new equipment marriage has its challenges. Thus, although efficiency retrofits are technically feasible at both ends of this spectrum, the motivation may not exist at the extremes. At the same time, retrofit technologies often come with higher implementation requirements and costs. They may require structural changes to the roof to address added weight or water and drain access. Also, since retrofits must be integrated with existing technology, both the retrofit and existing equipment have to be optimized for energy savings and delivery of a building s specific needs and requirements. Furthermore, maximum efficiency can be achieved only if certain conditions are met (e.g., dual paned windows, insulation). If the contractor does not appreciate and communicate these assumptions to the customer, the retrofit s performance may be disappointing. The technical and communication skills required for proper installation and optimal performance requires training and sophisticated understanding on the part of contractors, which may be lacking in some cases. Furthermore, customers may be unwilling to pay more for proper installation. It should be noted, however, that the degree of complexity involved in installing retrofits varies by technology. Some technologies and manufacturers make it very straightforward and easy. For example, Technology B provides detailed instructions Southern California Edison Page 17